Automotive Sector India

The automobile industry in India is the world’s 3rd largest, with the country currently being the world’s 7th largest CV manufacturer. Two-wheelers
dominate the industry and had a 79% share in the automobile production in FY 2016-17. Two-wheeler sales are expected to grow 8-10% in FY 2017-18.

The passenger vehicle sales in India crossed the 3m unit milestone during FY 2016-17, and is further expected to increase to 10m units, by FY
2019-20.

The auto industry is set to witness major changes in the form of electric vehicles (EVs), shared mobility, Bharat Stage-VI
emission and safety norms. Electric cars in India are expected to get new green number plates, and may also get free parking for three years, along with toll waivers.
India’s electric vehicle (EV) sales increased 37.5% to 22k units during FY 2015-16, and are poised to
rise further on the back of cheaper energy storage costs and the Government of India’s vision to see six million electric and hybrid vehicles in India,
by 2020.

India is also a prominent auto exporter and has strong export growth expectations for the near future.
Overall, automobile exports grew 13% year-on-year, between April-December 2017.

Indian automobile industry has received foreign direct investments (FDI) worth USD 18b, between April 2000
and September 2017.

Some of the recent/planned investments and developments in the
automobile sector in India are as follows:

• The only electric automaker in India, Mahindra and Mahindra Ltd., has partnered with Uber for deploying ist electric sedan e-Verito and hatchback e2o Plus,on
Uber platforms in New Delhi and Hyderabad.

• Vedanta Resources Pic is planning to invest around USD 9 billion in India, and create more than a million direct or indirect jobs in
the country.

The Government aims to develop India as a
global manufacturing as well as a Research and
Development (REtD) hub. It has set up National Automotive
Testing and REtD Infrastructure Project
(NATRiP) centres, as well as a National Automotive Board, to act as facilitator
between the government and the industry. The Indian Government has also set up an ambitious target of having only electric vehicles being
sold in the country by 2030.

Alternative fuel has the potential to provide for the
country’s energy demand in the auto sector, as the
CNG distribution network in India is expected to rise to 250 cities in 2018,
from 125 cities in 2014. Also, the luxury car market could register high growth and is expected
to reach 150,000 units, by 2020.

In the month of December, the industry registered cumulative sales of 1,666,646 units (+36.39%),
with passenger vehicles (239,712 / +5.22%), commercial vehicles (82,362 / +52.62%), three-wheelers (56,980 /
+90.54%) and two-wheelers (1,287,592 / +41.45%), all posting substantial growth. The notable surge has rather kept the industry foot
tapping almost the whole of Q3 of FY2017, with the amplification
primarily coming across over a low year-ago base, created by the prolonged effect of the
government’s demonetization drive, implemented in November 2017.

Along the first three quarters between April-December 2017, the industry scored cumulative sales
of 18,519,618 units, registering an overall growth
of 11.28%, with passenger vehicles (PV) selling 2,425,911 units (+8.13%), commercial vehicles (CV)
seeing sales of 574,337 units (+15.19%), three-wheelers garnering sales of 438,227 units (+7.89%) and
two-wheelers clocking sales of 15,081,143 units (+11.76%). With considerable growth across all key
vehicle categories, FY2018 looks poised to put the Indian automotive
sector in an upbeat mood by the end of this fiscal.

PV exports, which comprised 20% of the overall
produce in Q3, witnessed de-growth of 7%. CV
exports were comparatively better than PVs and
registered a 3% growth, with 28,000 units being shipped (Q3 FY2017:27,000). Exports
accounted for 12% of the total CVs manufactured in Q3 of FY2018. Three-wheeler segment lead the tally, exporting
104,000 units (Q3 FY2017:67,000) and recording a substantial 54% growth, exporting 37% of the total
produce. Two-wheeler exports registered shipments of705,000 units (Q3 FY2017:573,000), growing 23% and seeing 13% of
the production being shipped to foreign markets.

The financial parametem including the interest rates on FVs
and CVs have continued to remain the same
in Q3 of FY2018, with nationalised banks offering
car loans at 9.5% and NBFCs offering loans for commercial trucks at 15.5%. Commodity prices have
trended in favour of the automotive sector, with key commodities including pig iron and virgin
aluminium showing a marginal decrease of 0.32% and 0.41%
respectively, between September-November 2017. While copper (+3.55%) and lead (3.29%) have
escalated during the same period, natural rubber declined by a considerable 6.18%.

On the global dais, growth in domestic PV sales in
India between January-November 2017 at 9.15%,
with sales of 2,989,397 units (January-November 2016:2,738,780), stood second only to Brazil,
which registered a tremendous 55.18% growth, clocking 666,416 units in the same period (January-November
2016:429,445). CV sales in India, which registered 707,476 (January-November 2016: 648,525 +9.09%)
also followed Brazil in terms of growth, which sold 34,477 CVs (January-November2016:27,900). While
China led in terms of the sheer size of the market,
selling 22,091,500 (+1.94%) PVs, UK (2,388,144 /
-5.04%) and the US 5,584,907 / -10.96%) faced a
sales slump during the first eleven months of the
calendar. South Korea registered 3,410,973 units (+0.45%) and Japan saw 3,413,573 units (+8.09%), in
the duration between January-November 2017.

While the overall manufacturing capacity utilization
across the industry is less than optimal, at around
75% until June 2017, a growing GDP of 7.6%
augurs well for the sector. Supporting factors like low inflation at 4% in FY2018 (which
once soared to even 12.4°/o in FY2010), fading of the demonetisation effect, improving investment outlook in the coming
future, along with the positive impact of GST implementation, have together made the apex body
take note and gauge an accelerated performance.

While PVs, which were earlier slated to grow between 7-9% will now march ahead with a realistic 9%
growth rate; CVs, rather than growing at 4-6% rate projected earlier, have seen a substantial jump to close the
fiscal at 13% and the two-wheeler segment has
also been revised to grow at 12% by end of March 2018, opposed to the earlier
9-11 % projected growth rate. Three-wheeler sale set to grow by 7%.

Within PVs, passenger cars are expected to grow by 7%, UVs by 20% and vans by 6%. Two-wheeler
segment will seescooters leading from the front with 20% growth, and motorcycles by 11 %. Due to
a decline in orders from State Transport Undertakings (STUs) in the public
transport space, growth for the bus segment is forecasted to de-grow by 13%, while the remaining CV segment is expected to post
a 16% growth rate by the end FY2018.

About Us

Since its creation in 2015, BOSTEL CONSULTING is providing services to international automotive
suppliers in the following areas:

Transformation Management

You are a business leader in an automotive company considering engaging a mature, professional executive, well qualified by relevant skills, practical experience and attitude, either to deliver a
specific business result within a limited time period, or to fill a gap in executive staffing?

Supplier Management

You are a business leader in an automotive company with the need to analyse new suppliers or audit the manufacturing
process for your product at an established supplier? You don't have the internal manpower to execute this in due time?

Business Development & Key Account Support

You are a business leader in an automotive company with the need to set up business for your product in Europe? You don't have the internal manpower to execute this in due time?

Make in India - Make in China

You are a business leader in an automotive company with the need toset up greenfield, sales office, supply base, fully owned subsidiary, distribution structure and ongoing advisory for ramping up businessand in identifying merger & acquisition opportunities in India or China?